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February 2014

Clarification on conflicting views of Courts on the issue of disallowability under Section 40(a)(ia) of the Act – CIRCULAR NO.10/ DV/2013 [F.NO.279/MISC./M-61/2012-ITJ(VOL. II)], dated 16-12-2013

By Pinky Shah, Sonalee Godbole, Chartered Accountants
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There are conflicting judgments of the High Courts, on the issue of applicability of provisions of section 40(a)(ia) of the Act. Various High Courts have taken divergent views on whether the section applies to amounts payable at the end of the year or also to the payments made during the year. CBDT has issued a circular clarifying the provision of section 40(a) (ia) of the Act would cover not only the amounts which are payable as on 31st March of a previous year but also amounts which are payable at any time during the year. For the purpose of section 40(a) (ia) of the Act, the term “payable” would include “amounts which are paid during the previous year”.

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